Unlike stocks and bonds, farmland is a tangible asset that generates reliable cash flows from agricultural production and can be sold at any time. The tangibility of land is attractive to investors seeking competitive returns with lower risk than equities. Investors with a long-term investment horizon often seek to build wealth over generations with farmland. However, the days of fast growth in both yearly crop payouts and dirt valuations appear to be over – at least until commodity markets realign from a global disequilibrium.
As the nation’s top producer of corn, Iowa land is a highly desirable investment, and high-quality parcels continue to sell at premium prices despite current market headwinds. These premium prices are due to two strong annual income streams: 1 crop production and 2 high cash rents. Across millions of acres of elite Heartland soil, Iowa produces more corn than any other state and contributes over 25% to national crop yields, which props up yearly revenue and drives demand for the state’s most prized farmland.
Aside from the lucrative yearly crop revenue, farmland offers other key benefits that can boost investor appeal and reduce downside risks. The state has lower property tax rates than most other states, typically less than 1% of the land’s value, and allows valuable inheritance tax exemptions when farmland passes to subsequent owners. This low cost of ownership and high liquidity can help preserve capital for buyers with a long-term investment horizon.
However, evaluating the profitability of any investment requires thorough research and analysis. Investors must weigh a number of factors including location desirability, future infrastructure modernization plans, resident demographic trends, and sustainability constraints when assessing the potential for land appreciation over time. Additionally, careful attention must be given to the overall economic conditions of the state and its surrounding region, which can impact both the economy and property values.
For these reasons, it is vital that prospective investors work with a qualified professional who can assist them in the full discovery process and provide expert analysis of individual parcels. A professional can help buyers understand the fundamentals of each farmland investment, avoid buying a lemon, and realize optimal risk-adjusted returns over the long term.
The Clever team of experienced professionals are experts in Iowa land and can help clients find the best opportunities to buy, lease, or sell. Contact us today to get started!
Investing in Iowa Farmland: Is it Worth It?
The question: is Iowa land a good investment is answered differently by each individual buyer. To maximize the value of your investment, it is important to consider several factors:
Considering that the supply of farmland is finite, the return on your land will vary based on how you invest. If you are looking to take advantage of market volatility and profit from price fluctuations, it is important to have a strategy in place that will allow you to quickly adjust your position.
This is particularly true in Iowa, where the state’s low taxes, favorable interest rates, low supply of available land, and strong demand from 1031 exchange buyers have fueled price increases.